Building a Business? Better get the right insurance to protect it!
As an entrepreneur, let’s face it, there are just about a million and one things on your to-do list. How will you get customers? How will you keep customers? How will you distribute your product? Hire, manage, and track employees? Inventory? And the list goes on and on and on…
One of the less sexy decisions you face is how to protect that asset you are building and who will help advise you on something that may not exactly be in your wheelhouse? Let’s start with the “Who”. When choosing an insurance advisor, start with the most basic questions.
Do I want face to face meetings with someone?
If so, make sure you select someone local.
Is the person who sold you the product who you will work with or does he/she have a service team?
Do I want a brokerage or a captive agent? What is the difference?
Captive agents offer generally one carrier only. If you seek out the help of a captive, that agent will prepare a quote for you only with the carrier she/he offers. If you fit that mold, the quote coverage and pricing may be great. If you don’t fit, you may be very limited in coverage options and pay more to get it. The benefit here is that it is likely the agent will know the product well. They only offer one.
A brokerage offers many carriers. For example, at Shepherd Insurance Group, we offer dozens of companies to shop out our customers information to achieve the best pricing and coverage for our client’s individual needs. The benefit here is that it often saves time and money because you needn’t call 5 different agents to get 5 different proposals. You give your info once. You listen to one proposal. If the market shifts and prices rise, you needn’t go get a different agent. Ask your existing one to re-shop for you.
Who will handle my claim if something happens?
Do I have local help if I want it?
Does the carrier have adjusters near me?
What is the experience of my agent? Are they new to the industry? (Claims is not usually where you want a newbie.)
Once you have selected who you will get proposals from, let’s establish what types of coverage you need as a business owner. While some items will be unique to your profession, here are some bases to make certain you cover.
Liability
General Liability covers bodily injury and property damage that you or your crew, your product, or service may cause. This one is a must for pretty much everyone!
Auto Liability covers when you or your employees are in a car and you injure someone or damage property. This is one of your largest exposures. Do not skimp here. (Also, you may need to consider Employers Non-Owned Liability if your employees drive their own vehicles in the course of business. Great examples are if your admin makes a trip to the bank on her way home or your line cook runs to the market to pick up extra veggies in his own car.)
Professional Liability Insurance is for mistakes you make working in the course of your profession. For example, as a stylist, the product you mix for coloring a clients hair gives them a reaction and she sues or perhaps as an accountant you missed a filing for one of your clients. To err is human, to be protected is just good common sense!
Employment Practices Liability protects you against suits that may arise as a result of dealing with employees. Wrongful termination, harassment, or discriminatory issues fall under this coverage. This one is often overlooked and unfortunately, suits are very common. The profession doesn’t matter.
Property
Business Personal Property is everything the moving truck would bring to your location. Inventory, stock, furniture, computers, equipment, etc. (Pro tip: if you are a business that has more inventory depending on the season, ask about seasonal coverage.)
Do you own your building? This is an obvious asset that will need insurance and if you carry a loan the lender will require it.
As a tenant, you may not be required to carry this, but I think you’d be crazy to skip it. Did you make any improvements to the space? If you are a boutique, did you add fitting rooms? Or maybe in the office you rented you put up a wall with a window to create a reception area. Landlords are not required to repair these improvements if there is a loss. Be sure to read your lease carefully. Even though the landlord’s policy should cover the building, they often slide in requirements that you are responsible for windows or the air conditioning unit. Make sure your agent knows about those requirements.
Workers Compensation
State law varies here, but a good rule of thumb is that if you have employees you should have workers comp.
You will be liable to pay for injuries incurred on the job, so it is a great idea to protect yourself from the get-go.
Life Insurance and Disability Planning
Key Person insurance covers employees that are indispensable. If you lost your best sales person, what would happen to the business? How long would it take to replace that person? Would you need signing bonus money? Money to hire and attract talent?
Buy Sell Insurance Plans provide for partnerships to be dissolved. If something happens to one partner, the other doesn’t automatically receive the other half of the business. The next of kin inherits. Do you really want to share the business with your partner’s second wife? Buy Sell Insurance allows you to have the funds to buy out the family without disinheriting them.
Legacy planning and protecting your family can also be covered by having a simple discussion with your life insurance professional.
While the list above is certainly not all encompassing, it should at least give you a place to start...so get started! If this isn’t an area that you know a lot about, ask a few other business owners you trust for a referral and start asking questions. Great advisors will take the time to answer your questions and tailor coverage and policies to you. If not, well, we already established that you have a million and one things to do. Move on to an advisor who will take the time and get yourself covered!